It is based on a C compiler that was originally adapted for the Atari 8-bit computers by John R. Dunning. The original C compiler is a Small C descendant but has several extensions, and some of the limits of the original Small C compiler are gone.

The original cc65 compiler was freely redistributable in source form, but does not qualify as Open Source Software according to the Open Source Definition because distribution of the software for monetary profit is not allowed.

The toolkit has largely been expanded by Ullrich von Bassewitz and other contributors. The actual cc65 compiler remains under the "freeware" license until it is completely rewritten, but the efforts have already produced a complete set of binary tools (assembler, linker, etc) and runtime library under a license identical to zlib's. The ca65 cross-assembler is one of the most powerful 6502 cross-assemblers available under an open-source license.

The officially supported host systems include Linux, Microsoft Windows, DOS and OS/2, but the source code itself is quite portable and has been reported to work almost unmodified on many platforms beside these.